Rants and musings about things political, philosophical, and religious.

The Economists’ Crystal Ball

In an effort to advise and appease a concerned public, economists are frequently paraded around in the media to offer their outlook on our collective financial future. Treated by many as sagacious oracles in possession of some magic crystal ball, their pundit hosts and media sounding boards further amplify the perceived wisdom of these individuals. In truth, the vast majority of economists are little more than shills for present public policy and gain their popularity only by spouting off sound bytes crafted by the federal government’s economic advisory team.

These statist apologists have been absolutely wrong (as recent events have so aptly demonstrated), yet they are still allowed to peddle their Keynesian snake oil in the same media outlets without admitting their horrible record of predictions and future economic outlook.

We have just witnessed them make a massive failure in diagnosis. Despite the fact that there was rampant evidence of trouble on various fronts — a housing bubble in many countries (the Economist had a major story on it in June 2005 and as readers well know, prices rose at an accelerating pace), rising levels of consumer debt, stagnant average worker wages, lack of corporate investment, a gaping US trade deficit, insanely low spreads for risky credits — the authorities took the “everything is for the best in this best of all possible worlds” posture until the wheels started coming off. And even when they did, the vast majority were constitutionally unable to call its trajectory.

For years there has been outright ridicule and denigration of anybody who criticized the underlying unstable economic foundation upon which our bubble had been inflated. With a DJIA cut in half, trillions of investment dollars wiped out, unemployment rates on the rise, insolvent state governments desperate for cash, and entire markets imploding, the question that must be directed to these babbling buffoons is: who’s laughing now?

Sadly, the brunt of the joke is the American people, since they are still turning for economic advise and predictions to the very people (and their philosophical predecessors) who got us into this mess! Because of their ignorance, they are continuously duped by the fact that the economists’ crystal balls are mere stage props used to foist an ulterior motive on a dumbed down people.

Advocates of and adherents to the Austrian business cycle theory accurately predicted the current economic crisis we are in, warning us as prophets in the wilderness for years. Just as their philosophical predecessors predicted the Great Depression, so too did the modern Austrians see the glaring warning signs and attempt to warn people about the threats we faced. Unfortunately, very few people are willing to swallow tough medicine in a time of engorged feasting.

Politicians—advised by the same economists who supported the policies that got us into this mess—scurry about, trying to look busy and solve problems. Appearances are made and hearings are held with leaders of national finance and economic regulation. But for all the spinning wheels, nobody considers implementing the suggestions of the individuals who actually foresaw this scenario (those previously referenced as “doom and gloom” naysayers). Instead, we are fed more of the same poison that put us in this pickle to begin with.

As children grow older and wiser, they learn that the common myths and magic of their youth are fallacies. There is no Santa Claus, Easter Bunny, or Tooth Fairy. Rabbits can’t magically appear out of hats, and people can’t survive being cut in half with a saw. But somehow, the overwhelming majority of people continue clinging to the fairy tale that media-embraced economists possess a crystal ball that grants them insight into our future. Until America wakes up and rejects these impostors, we must brace ourselves for more centralized, statist Keynesian government intervention into the marketplace. In short, this sleight of hand magic trick results in you being pick pocketed. Abra cadabra!

11 Responses to “The Economists’ Crystal Ball”

You’ve made some excellent observations. What you fail to recognize is hard explanation and root causes for the current state. Blaming the analyst of the situation is a poor premise–the Keynesians have the most relevant how-to principles to take an economy out of a recession, and that is whom everyone is listening to.

I believe Satan to be a Keynesian. I’m personally a subscriber to a mix of the Chicago and Austrian schools.

Absolutely, and I’m not here arguing that the economists themselves are to blame for the mess. Inasmuch as they’ve been cheerleaders for poor policy, then they deserve some of the blame. But the real culprits are those responsible for actually implementing these catastrophic economic programs and philosophies.

I’ve castigated plenty of such people elsewhere on this blog. The purpose of this specific post is to point out that the average person believes these economists to be wise and continues to listen to commentators that have been anything but correct in the past.

In political systems, correctness matters only insofar as it is part of a calculation to achieve a political goal. In politics, personality and power trump truth every time. Thus, as long as we continue to seek salvation via politics, we will be destined to receive the rewards (consequences) of such appeals.

I’ve found it interesting listening to these “economists” and others in the media explain our current situation–or perhaps better said, not explain our current situation. It seems to me that the common American thinks that we are in a deep recession because of greedy bankers or lack of regulation on Wall Street. While certainly “greedy” bankers took advantage of the situation, the issue of our national economic policy or Federal Reserve system rarely if ever is discussed.

Connor, what do you think it will take to get the nation talking about the real issues at hand?

That we henceforth be no more children, tossed to and fro, and carried about with every wind of doctrine, by the sleight of men, and cunning craftiness, whereby they lie in wait to deceive;

What I find ironic here is:

1) The less religious a person is, the more likely they will be willing to accept Keynesian economics.
2) The less religious a person is, the more likely they will be to believe that religious people are merely children who still believe in fairy tales like a Supreme Being.

The Article about Keynsian economics is short on serious or substantive criticism. Much of what the author claims is highly debatable. I’d love to be more specific, but I don’t have the time.

An economist who claims to predict more that a few months into the future is not only a poor scientist, but dishonest as well. Media or politicans give them airtime because they’re either ignorant or have a conflict of interest to be nonobjective. This isn’t the first time that politicians have created statistics and predictions out of thin air….

Predicting the economy is the same as predicting the weather. the problem is not bad models. Nor is it an flawed understanding of the system, but the inherent randomness of the system as a whole. Having a large margin of error, in not a necessary or sufficient reason to totally discard econometrics. On the other hand, economics does suffer from the “actor-observer” paradox. This is the fact that if you have an accurate economic model, and everybody knows about it, it introduces a layer of feedback into the system that causes it to no longer be accurate.

The “Business Cycle” theory is is appealing on a superficial level. A number of its predictions don’t pan out in the real world. For example, it implies that as prices drop in a recession, spending should rebound, but the opposite seems to be true. Another problem is that such business “cycles” can and sometimes do wipe out entire civilizations. For example, the Maya, Athens, Rome (among other causes..), a number of Chinese dynasties… Avoiding a national collapse is a good reason not to support “Laissez Faire Economics”

My main criticism of the so-called Austrian School, is I feel it’s an Ideology, a dogma. As such, it resists correction, even in the face of unambiguous evidence. The old fallacy of “if the idea doesn’t fit the facts, then rearrange the facts…”

I like those that come out and claim “I saw this financial crisis coming 6 years ago.” And want you to by some program, ticket, or product. Anyone can say bad things are coming every year and eventually they are right. What about the 5 years they were wrong?

When it comes to the some things like the economy or the weather, EVERYTHING is an ideology. I don’t know what you expected. There is no proof because there is no test or evidence.

Economists on both sides for decades have used any new fact as “proof” that their theories are valid. Or if evidence seems to lead in the opposite direction, there are plenty of other social factors to blame it on rather than their theories.

If your point was to declare that Keynesian Economics is precise and scientific while Austrian is dogmatic, you are grossly in error. If anything it is the other way around. The Austrian school at least has the ability to be tested and proven on a small scale (running of a small business). Here the actor-observer paradox carries little weight. If the business succeeds or fails is the final test result.

Keynesian economics has no such test since by definition it must be done on a large scale to provide the benefit it promises. Think of it. Keynesian economics is the capitalist’s communism. If such an oxymoron is not dogmatic, I would be hard pressed to find a better example.

When it comes to the some things like the economy or the weather, EVERYTHING is an ideology. I don’t know what you expected. There is no proof because there is no test or evidence.

Well, in the case of meteorology, the physics and mathematics are generally well understood. The problem in predicting the weather lies in the difficulty of collecting accurate, consistent, high-resolution data.

In the case of economics, I think you’re right that any theory will have a level of, let say abstraction…..it has to. You’re also right that applying full scientific rigor is difficult or even impossible. There’s just no way to experiment under controlled conditions. However I think it’s still possible to be empirical and utilitarianistic. The only other option being a slippery slide into the murky realm of philosophy, which is where I see the Austrian School heading.

Economists on both sides for decades have used any new fact as “proof” that their theories are valid. Or if evidence seems to lead in the opposite direction, there are plenty of other social factors to blame it on rather than their theories.

Data collection is also a serious problem in economics as well. An example is the failure of rating agencies to elucidate the risk in certain, now-infamous types of securities. That’s one of the reasons for the current instability of the stock market, people no longer trust numbers from the rating agencies, nor the government. (It’s not always in in the government’s interest to be honest about it’s economic numbers, that’s just common sense.)

If your point was to declare that Keynesian Economics is precise and scientific while Austrian is dogmatic, you are grossly in error.

I apologize if that’s what i seem to be implying. I don’t have a lot of confidence in Keynesianism either. I think the evidence that it actually works isn’t clear at all.

The Austrian school at least has the ability to be tested and proven on a small scale (running of a small business).

I can only give you a specific counterargument, that the running of a small business bears little comparison to the entire world economy. You’re talking about micro- economics not macro-.

About the Author

Connor Boyack is president of Libertas Institute, a public policy think tank in Utah. He is the author of several books along with hundreds of columns and articles championing individual liberty. Connor's work has been publicly praised by national figures such as Ron Paul, Judge Andrew Napolitano, Tom Woods, and many others.

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